The New Face-to-Face Banking -...

The New

Face-to-Face Banking

November 2017

©MLB Financial Group Limited. Not for Redistribution

http://www.mlb-financial.com/

SUMMARY

Digitization gives banks the opportunity to take customer service to the next level. The proliferation of mobile

technology and easy-to-use Application Programming Interfaces (APIs) platforms is now changing the global banking

industry. Video communications have expanded significantly over the past few years. Financial institutions are turning

to launch a face-to-face video banking service as part of their brand tansfomation strategies, allowing clients to

securely interact with banking consultants via audio, video and chat. DBS/POSB introduced nine DBS/POSB Video

Teller Machines (VTMs) across Singapore on 25 April 2017, offering round-the-clock branch banking services to

customers1. The Teller Automation and Branch Transformation 2017 report from Retail Banking Research showed

video chat is the trend for branches to build in-person customer relationships while keeping branch costs down and

saving time. The research emphazises the success of video banking in China , where it was first installed in 2011 by

China Guangfa Bank. Vidyo, a provider of embedded video and video conferencing technology, counts six out of the

top 25 largest banks in the world as video banking customers, using video as part of their mortgage, private banking

and wealth management services. Almost one-third of banking clients already deposit at one new-age tech-driven

financial firm or non-traditional provider, despite traditional banks still holding significant market shares. The success

of financial institutions will require a change towards a more open and digitally sustainable business model which

focuses on customer innovation. The transition to video communications using in retail banking delivery will

transform the whole industry.

November 2017



Traditional Firms V.S. Non-traditional Firms

Temnos reports that major banks worldwide experience almost 90% of customer interactions via digital channels. A

faster-than expected adoption of new cosumer technolohies is transfoming the retail banking. Face-to-face

relationships are increasingly being replaced by digital technologies. Banks have been reducing the number of

traditional full-service branches, from 64% of the total in 2011 to 49% by 2016. Branches are most likely become less

focused on simple transactions and more focused on sales activities. The average number of branch visits is eight. By

2022, the average number of visits will shrink to only three per year. A report by Efma, CUNA Strategic Services and

Vidyo, tested the role of video banking playing in the digital transformation of banks. Respondents consisted of 282

banks from 63 countires. Around 10% of banks deployed at least one form of video banking in 2016, while 50% will

use it by the end of 2017 and 80% are planning to offer a video banking service by the end of 2018, particular those

large financial institutions. According to the report, excellence in customer engagement is ether important or

extremely important to the success of their business. 80% of customers who switched providers due to poor customer

service said they could have been retained. The personal connection is still seen as important for banks, but 93% of

the banks would expect high-quality video banking to have a positive impact on customer satisfaction. Video and

AR/VR banking allows new and valuable engagement opportunities nad is perceived as a new way to strengthen the

customer experience when compared to more traditional banking.

Source: Capgemini Financial Services Analysis, 2017; Capgemini and LinkedIn WFTR Voice of Customer Survey, 2016

The first video game competition can be traced back to 19 October 1972, at Stanford University’s Artificial Intelligence

Laboratory in which about two dozen students competed playing Spacewar (Li, 2016). According to the lexicon at

Dictionary.com, Esports described as competitive tournaments of video games, especially among professional gamers.

Professional players perform for stadiums packed with thousands of cheering fans. Esports also known as electronics

sports which is primarily facilitated by electronic system and getting popularity among gamers. Wikipedia defines it as

a form of mind sports where players contest in video gaming competition in game arenas and eSports tournaments

organized on a mass level. Esports gamers can be in the same room, or on opposite sides of the world. Competition can

be individual or it can include hundreds, or even thousands of participants. Games require a high degree of tactical

understanding for a gamer to defeat his opponent.

Esports Trend

Source: Capgemini Financial Services Analysis, 2017; Capgemini and Linked WFTR Voice of Customer Survey, 2016

http://www.digital5sblog.com/the-evolution-of-the-esports-ecosystem/

http://www.digital5sblog.com/the-evolution-of-the-esports-ecosystem/

November 2017



Tech-driven financial services providers or non-traditional firms are gaining increased acceptance. Across the world,

non-traditionalfirms performed slightly better than banks, delivering a positive experience. Non-traditioanl firms in

North America showed 57.8% of positive experiences from customers, compared to 49.5% for banks. Nearly 52.4% of

customers engaging with non-traditional firms have a relationship with three or more of them. Banks are less flexible

and slow to respond to the new firms amid burdensome regulations, aging systems and a resistance to change. Data

from the 2015 J.D. Power Retail Banking Satisfaction Study shows that acceptance of digital channel functionality

continues to grow, particularly within Gen Y and Gen Z demographic segments. The Matrix and Minority Report

— millennials predicts millennials will mak up 75% of the U.S. workforce by 2025. Gen Y and tech-savvy customers

are the biggest pool of customers using servies from non-traditional firms. Millennials are more likely to manage their

finances through social media, as well as payment and fintech companies. More than 55% of Gen Y and tech-savvy

customers in China and 60% in India prefer using services from non-traditional firms.

It is vitial for financial institutions to capture the opportunity to keep customer relationships and meet the demand for

fast and convenient solutions. A research done by Accenture showed competition from non-traditional firms could

erode a third of traditional bank revenues in North America by 2020 and 27% of customers are willing to shop for

better deals of superior products. According to the Brookfield, millennials, high net worth individuals and people who

live in urban areas are far more likely to be open to new innovations and non-traditioanl frims. 65% of millennials are

comfortable managing their finances through a payments company, compared to 26% of non-millennials. When asked

specifically about accessing voice banking via their financial institution, 15% of coustomers expressed interest,

including 33% of millennials. Interested coustomers said they would like to check account balances (68%), pay a bill

(46%), and transfer money between accounts (38%) through a voice-activated device. Meanwhile, 91.3% of

traditional banks and 75.3% of FinTechs said they expect to work with each other in the future. By opeing of APIs,

bank could be moetize their data and discover new revenue sources.

November 2017



Chatbots in Banking

Chaots are emerging in banking industry as an cheap way to apply artificial intelligence (AI) to interact with

customers via messaging and digital platforms. Large banks are trying to merge their traditional services with robotics

in banking in an attept to attract more tech-savvy customers. BI Intelligence’s research found the growing public

acceptance of chatbots have created more trustworthy relationships with users, particularly for millennials. A report

by Juniper2 predicts that chatbots will be responsible for over $8 billion per annum of cost savings by 2022. Banks

could offer advice on a large scale and learn about customers’ habits by applying chatbots.

For instance, Forbes indicated that Swedbank showed

positive results of their chatbot tool called “Nina” built with

Nuance Communications. The bank says of the 40,000

conversations a month that Nina handles the chatbot

resolves 81% of the issues. Also, ImaginBank aims to help

millennials with a Facebook Messenger chatbot.

November 2017



Feature of Banking Chatbot

Source: Chatbots Opportunties and challenges in the banking industry, COMTRADE DIGITAL SERVICES

Tech-savvy customers expect their banks to provide personalized support and faster resolution. Chatbots can

supplement existing communication lines such as online chat. Chatbots provide real-time text and voice assistant to

customer for both online and mobile services. Chatbots will not only understand customers’ needs but also anticipate

their next actions, helping simplify the whole banking experience of customers. Chatbots will also keep track of

tranactions, analyze the data and understand the spending habits, giving budget planning tips and personalized

services. Meanwhile, a chatbot can detect and effectively monitor warning signs of fraudulent activity.

With some countries considering a loosening of fintech adoption rules, banks could be more easier to offer bot-based

services. Chatbots will be a part of omin banking strategy and become a trend to attract the younger customers.

November 2017



Video Banking

A lot of fintech start-ups are taking market share from the traditional banks. New technologies are disrupting the

industry and changing the way banks operate. Banks are trying to transform the services branches offer and

encourage customers to use new technologies to save time and costs. They are pushing live chat, particularly live audio

and video chat, via social media or on their own web sites. Live chat combines approachability and human interaction

by creating a real-time, contextual dialogue between a bank representative and a customer. With customers can be in

thier home, office or anywhere and resolve any issue they have with their bank, at the right time. Nationwide Building

Society expanded the use of video conferencing equipment for customer consultations to 100 more branches in 2015,

being the first association to enable mortgage consultants to meet customers via high-definition video links using

Cisco technology. The technology has also been expanded to include financial planning managers and personal

banking managers.

The Efma research found that 70% customers

prefer video banking on mobiles and desktops

than in branch or ATMs. Most banks choose to

initially offer their video services from the

banks’ own properties. Customers are able to

visually communicate with banking experts

via the bank’s proprietary corporate network.

66% of banks surveyed think video services

most suitable for private banking and 63%

consider expanding the video to mortgages

and loan services. The application of video in

Source: Capgemini and Linked WFTR Voice of Customer Survey, 2016 banking not only reduce the number of

traditional brick and mortar banks, but also number of staff in the banking hall by 45% as less customers visit the

physical banks.

The key concept is to use innovative digital engagement like video banking to attract customers to the quick and easy

methods of opening new accounts, receiving a loan available both in branch and online. With the help of the video

chat, customers do not need to go through a number of steps and follow IVR guidelines to reach the exact service

center. Customers are able to connect with video operators on screens, which the services enhance customer

relationships and increasing cross-sell an dup-sell success rates. That’s why many banks are moving to live chat

technology to differentiate their online channels and retain the customers.

November 2017



In 2014, Barclays Retail Bank launched a 24-hour video banking service that will enable customers to receive face-to-

face conversation with an adviser via their smartphone, tablet or computer, wherever they are in the world. Barclays

the move was “a UK banking first”.

Source: IndusInd Bank - How To use Video Branch

IndusInd Bank3 launched a purely video-based channel connecting customers on mobiles and desktops to staff

representatives for face-to-face communications. The Video Branch face-to-face online banking customer service

which is powered by Vidyo encourages customers interact with the Video Branch at their own convenience both from

his desktop/ laptop computers on smartphones. Customers can hare graphs, spreadsheets and other documents with

the bank representatives in real time from right within the video call.

Survey by Efma, CUNA Strategic

Services and Vidyo showed that

customer satisifaction increased

and optimize the staffing

resources after banks fully

deployed a video banking service.

IndusInd Bank further reported

that its Net Promoter Score is 50%

more cases are solved in the first

call compared to its standard voice

service.

Source: Capgemini and Linked WFTR Voice of Customer Survey, 2017

Banks also partner with companies to develop video banking and include new security features to the product, such as

digital signatures , facial recognition, and voice biometrics. video banking can be fully encrypted and run on the

November 2017



banks’ own data systems, more secure than telephone banking. The widely adoption of video banking and mobile

banking have already caused 9,100 branches in Europe closing in 2016.

However, one main difficulty is integrating with exitsting tools and workflows. Other common challenges banks

identified included privacy and the secure transmission of sensitive data, compliance, cost and customer

preparedness. LiveBank, a virtual banking services provider, said another challenge is cultural differences. In countries

with strict religious codes like the United Arab Emirates, a male caller speak to a male representative and a woman

caller speak to a woman representative.

AR and VR Banking

Virtual reality (VR) and augmented reality (AR) are

beginning to change the world. The technology can

dramatically personalise and enhance the customer

experience. Banks could use avatars to almost

replicate the old banking experience. Goldman

Sachs has predicted that the augmented reality

market will be worth $80 billion by 2025. There are

many banks and credit unions looking for

alternatives for the customers still using branches,

despite as many as 90% of transactions taking place

online. Industry experts predict that 33% of

Millennials won’t need a bank at all in the near

future.

The 2017 Global Digital IQ Survey by PwC showed

that banks will be investing in AR in three years and

customer experience will be an additional

goal. With a high demand for a more intuitive

customer experience in digital banking, there will

be a widespread use of VR and AR in the future, augmented, virtual and mixed reality are expected to be the trend for

the internet of things (IoT) ecosystem. Conventional branches will no longer be required when all the services could

be accessed from home.

Kony, an enterprise applications developer based in Austin, is working with finnaical instiutions to introduce its AR

banking features, called Branch View.

Source: PwC, 2017 Global Digital IQ Survey

November 2017



Source: Next Reality

The app can personalize the AR experience for customers with showing personally relevant and contextual

information like portfolio information and special rates to specific customers. The platform covers everything from the

typical digital tools for retail and business banking to new technologies. key points of interest highlighted and

personalized messages displayed on the walls.

According to an article from IT

ProPortal4, the Commonwealth Bank of

Australia and Halifax in the UK offer

‘home finder’ apps which use AR

technology to enable users to view and

pull up data on houses for sale as they

pass them. Financial software vendor,

Misys, developed a proof of concept

augmented reality enabled personal

financial management app. Royal Bank

of Canada also introduces the AR

branch and ATM locator which Chinese

customers could use banking AR apps

to receive coupons for stores nearby.

November 2017



Banks could also offer customes a face-to-face discussion through a virtual bank. With VR enabled smartphones or

devices such as Oculus Rift, a virtual bank could be created with a high level of interaction. Customers could meet with

a virtual bank representative and discuss products or services which would also be available in a physical branch.

With the use of AR/VR-based augmented channels, the friction of visting the branch for in-person interactions can be

be signifacntly reduced.

BNP Paribas released a VR-based retail banking app in June 2017. The app enables users to access their bank

transaction records as well as move through the various steps of a real estate purchase in Virtual Reality mode.

Source: The BNP Paribas 360 ° 2017 Corporate Film

In addition to the mobile app, a ‘teleportation’ capsule called the POD was developed, allowing prospective purchasers

to port themselves inside a new apartment or building under construction or for sale and view it in 3D and 360°.

All current banking AR applications are based on

smartphones. When this technology is applying

with products like the Microsoft Holoens, a more

immersive experience could be offered to the

users. The bank representative would able to use

Holoens to make notes on documents for the

customer, which overcome the shortcoming of

video banking. For instance, Citibank use

Microsoft’s HoloLens headset to create

Source: Citi’s Holoens Trading Concept Holographic Workstations for traders which allow

the traders to visaulise and make decisions collaboratively with customers. With AR/VR, information can be displayed

in 3 dimensions and traders could interact with the information in a futuristic manner.

November 2017



CONCLUSION

Advances in technology continued to offer new avenues for banking. Video banking or digital banking will be a

common way for banking customers to engage with bank representatives to participate in a broad variety of

transactions. The accelerated adoption of digital technologies among consumers reshaped the banking industry.

Multichannel offerings become increasingly important to business models. Innovation and customer-centric banking

must also be incorporated into the model. Digital banking is undoubtedly the future of banking. However, the dynamic

economic environment and tough regulation threaten the pace of transformation. By just offering mobile and online

banking services will not give banks the differentiation they need to retain customes. Along with the adoption of new

techonogies, banks also need to create an immersive relationship or personal relationship with customers and develop

continuous daily customer interaction.

November 2017



Endnotes

1 THE STRAITSTIMES, “DBS/POSB launches nine video teller machines for round-the-clock service to customers” 25

April 2017,

http://www.straitstimes.com/business/dbsposb-launches-nine-video-teller-machines-for-round-the-clock-service-

to-customers

2 MOBILE BANKING USERS TO REACH 2 BILLION BY 2020, REPRESENTING MORE THAN 1 IN 3 OF GLOBAL ADULT

POPULATION

https://www.juniperresearch.com/press/press-releases/mobile-banking-users-to-reach-2-billion-by-2020

3 IndusInd Bank rolls out video conference service for customers,

http://www.thehindubusinessline.com/companies/indusind-bank-rolls-out-video-conference-service-for-

customers/article6075200.ece

4 Augmented reality in financial services, April 11, 2017,

https://www.itproportal.com/features/augmented-reality-in-financial-services/

Disclaimer

The information contained within this document (‘information’) is believed to be reliable but MLB Financial Group does not warrant its completeness nor accuracy. Opinions

and estimates contained herein constitute our judgment and are subject to change without notice. MLB Financial Group shall not be liable for any errors, omissions nor

opinions contained within this document. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. For the avoidance of

doubt, any information contained within this document will not form an agreement between parties. Additional information is available on request.

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MLB Financial Group manages a substantial amount of assets for a broad range of institutional and private clients including funds and family offices. We offer comprehensive

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opportunities by leveraging on our insight, experience, and global presence.

Contact

Tel: (852) 2117 3482 Fax: (852) 2117 3486 Email: [email protected]

Prepared by Bess Chau

Assistant Operations Manager

http://www.straitstimes.com/business/dbsposb-launches-nine-video-teller-machines-for-round-the-clock-service-to-customers

http://www.straitstimes.com/business/dbsposb-launches-nine-video-teller-machines-for-round-the-clock-service-to-customers

https://www.juniperresearch.com/press/press-releases/mobile-banking-users-to-reach-2-billion-by-2020

mailto:[email protected]

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